Stock Market Hours of Operation

Stock Market Trading Hours

Main Market Hours

The major US markets, NASDAQ & NYSE, open at 9:30 a.m. EST (6:30 PST) and close at 4:00 p.m. EST (1:00 PST).

The list of U.S. holidays the market is closed on can vary slightly from year to year; the updated list can be found here.

Isthemarketopen.com has a very helpful image showing the main market hours based on your geographical location.

U.S. Stock Market Main Trading Hours, Courtesy of Isthemarketopen

Pre-Market & After Hours

With the popularity of internet trading, anyone can now trade with the click of a button, leading to a demand for longer market hours. Even though there is an open and close, it is possible to trade in the market outside those times.

This can be done during pre-market hours (PM) and after hours (AH). The current (2021) hours are:

  • PM Trading is from 4:00 a.m. to 9:30 a.m. EST
  • AH is from 4:00 p.m. to 8:00 p.m. EST.

PM and AH trading were first introduced in the early 90s so that American markets could compete with foreign stock markets that were open longer. Since then, the times for PM and AH trading have changed multiple times due to the increased use of electronic trading (online brokers).

Note: Individual brokers can have slightly different PM and AH trading hours.

Increased Risk During Pre-Market & After Hours

Trading during PM or AH is made possible because of electronic communications networks (ECNs). These networks match buyers and sellers, which allows the transaction to take place. Since MM generally do not participate in PM and AH trading, ECNs allow the trading to continue in their absence.

While PM & AH trading is allowed, it is only recommended for experienced traders. During these sessions, the trade volume, which is the number of shares that change hands, is significantly less than during main market hours.

We know that MMs add liquidity to the market, so without them, the market becomes a true auction (no middleman). If you are selling your stocks, the order will only go through if there is someone out there willing to buy at the exact price you are selling. This makes liquidity much lower and prices more volatile.

More volatility means higher risk. Prices can jump or drop much quicker, and spreads on stocks tend to be further apart (a sign of increased volatility). It is also possible for there to not be enough liquidity to cover your order, so it may go unfilled or only be partially filled. The image below illustrates the volatility of PM and AH trading sessions compared to main market hours:

PM & AH Increased Volatility Example

In the above chart, we can see that the price increased $4 with about 1.7 million shares traded. Whereas in after hours (the light grey background area), we can see that the price decreased almost $8 with only 400,000 shares traded.

This type of chart is called a candlestick chart. Being able to read one is critical for every day trader. If you would like to learn more about it, check out our Day Trading 101 course!

Sidenote

Day traders that trade PM and AH will usually trade stocks associated with an important news release also referred to as a catalyst. Stocks with a catalyst can have very high trade volumes, sometimes even higher than during normal market hours.

This very high volume reduces the risk of trading outside main hours because it has plenty of liquidity. This will be explained much more in depth in the Day Trading 101 course.

Different Order Types

Another important difference between trading PM and AH is that only certain types of orders are allowed. There are a variety of different orders, but we will only focus on the main ones in this course.

Order Types, Courtesy of Webull

During main market hours, market orders, limit orders, stop (loss) orders, stop limit orders and trailing stop orders are allowed, but only limit orders are allowed during PM and AH.

Market Order

A market order is executed immediately, no matter what the current price is.

  • Market order to buy: The buy order is executed instantly at the current ask price.
  • Market Order to sell: The sell order is executed instantly at the current bid price.

Limit Order

Think of a limit order as the maximum or minimum price you are willing to buy or sell a stock for. The order does not execute until your specified price is reached.

  • Limit order to buy: Your specified price is placed below the current price, and once the current price hits (or goes lower than) your specified price, the order executes.
  • Limit order to sell: Your specified price is placed above the current price, and once the current price hits (or goes higher than) your specified price, the order executes.

Charles Schwab has a helpful illustration of limit buy and sell orders. Don’t worry if you confuse the different order types. I still confuse them sometimes too!

Limit Orders Illustration, Courtesy of Charles Schwab

Examples

Let’s go over a few scenarios to understand these orders better. It is recommended that you try to determine the correct answer on your own before looking at it.

  • Scenario #1: You are browsing the web and you come across good news for American Airlines (Ticker: AAL). You think the price will increase in the long term, so you would like to purchase some stocks right now. It is currently 2:00 p.m. EST. What type of order do you place?
    • Answer: Buy market order
  • Explanation: Since it is 2:00 p.m. EST, the market is currently open. The key here is that you would like to purchase the shares right now. Market orders execute immediately, and you would like to purchase shares, so the answer is a buy market order.
  • Scenario #2: It is 5:00 p.m. EST, and you are watching the evening news. The main news story is that investigative reporters uncovered evidence of fraud within a company that you own shares in. You know this means the stock price is about to drop, and you decide to sell all your shares. What type of order do you place? And if the current share price is $10, what should you set your sell order at?
  • Answer: Sell limit order priced $10 a share.
  • Explanation: Since it is 5:00 p.m. EST, the market is in AH and only limit orders are allowed. This means there are two actions you can take.
    • 1 – You can attempt to sell your shares during the AH trading session. Your success depends on if anyone wants to buy your shares and how much they decide they are worth. If there are only bids for $5 per share, that is a large difference from the $10 you expected.
    • 2 – You do not want to sell at the very low bid prices, so you can wait until the main market opens in the morning to execute a market order. With this option, you are hoping the price does not fall significantly over night.
  • Neither option is ideal, but investing always involves some level of risk!

Why Are Only Limit Orders Allowed?

The order restriction for PM & AH trading is because the low level of trading volumes leads to high volatility and high spreads, which could lead to undesirable order executions.

Remember, a market order to buy is executed at the current ask price, and a market order to sell is executed at the current bid price.

The large spreads mean the bid/ask price could be very different from the current price, and many people would have orders filled at very different prices than they were expecting. Below are some examples of spreads during AH.

BVS with $6.69 spread
CHUY with a $6.53 Spread
INCR with a $2.63 spread
INKT with a $16.00 spread

To learn about the other order types and how to implement them into your trading or investing strategy, check out our investing and day trading courses.

Benefits of Pre-Market & After-Hours Trading

A major benefit of PM and AH trading is that if a company has a positive news release, investors can go straight to the market and purchase the shares (assuming the news release was also during PM or AH trading hours).

This allows for an early entry into the stock before everyone hears about the news, starts buying the stock and drives the price up.

When a company experiences a positive news release during PM and AH, the volume for the stocks tends to be high enough that the spreads are much closer. Below are some examples of stocks with heavy AH trade volumes.

CPIX up 134.55% in AH trading with a spread of only $0.03
PPSI up 27.17% in AH trading with a spread of only $0.09

Conclusion

Important Takeaway #1

The most important takeaway from this section is understanding that the market has 3 separate sessions of operation:

  • Pre-market session is from 4:00 a.m. to 9:30 a.m. EST. (Only limit orders are allowed)
  • Main market hours are from 9:30 a.m. EST to 4:00 p.m. EST (All order types are allowed)
  • After hours is from 4:00 p.m. to 8:00 p.m. EST (Only limit orders allowed)

Each broker may have slightly different PM and AH times, so make sure to check with your individual broker before trading.

Important Takeaway #2

Trading PM and AH should be done with extra caution, and this kind of trading is not recommended for beginners. These trading sessions perform as a true auction where orders are only between buyers and sellers; there is no middleman (market makers).

This leads to much smaller trade volumes, much higher spreads and a lot more volatility in the market, which equals much higher risk.

Always exercise extra caution when trading outside main market hours!

Video Learning

The YouTube channel Brandon Beavis has a great video explaining some of the previously concepts. Click on the video below to watch it. We do not take any credit for their work or claim the video to be ours. Please like, follow, and share their video to support their channel!

Extra Resources

Don’t forget to check out the Materials Tab for helpful extra resources and definitions of Key Terms!

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Extra Resources:

Key Terms (Courtesy of Investopedia):

  1. After Hours (AH) Trading – “After-hours trading starts at 4 p.m. U.S. Eastern Time after the major U.S. stock exchanges close. The after-hours trading session can run as late as 8 p.m., though volume typically thins out much earlier in the session. Trading in the after-hours is conducted through electronic communication networks (ECNs).”
  2. Candlestick – “A candlestick is a type of price chart used in technical analysis that displays the high, low, open, and closing prices of a security for a specific period. It originated from Japanese rice merchants and traders to track market prices and daily momentum hundreds of years before becoming popularized in the United States. The wide part of the candlestick is called the "real body" and tells investors whether the closing price was higher or lower than the opening price (black/red if the stock closed lower, white/green if the stock closed higher).”
  3. Catalyst – “In equity markets, a catalyst is an event or other news that propels the price of a security dramatically up or down. A catalyst can be almost anything: an earnings report, an analyst revision, a new product announcement, a piece of legislation, a lawsuit, the outbreak of war, an offer to buy a company, a move by an activist investor, a comment from a CEO or government official, or the conspicuous absence of a company officer at a special event.”
  1. Electronic Communication Network (ECN) – “An electronic communication network (ECN) is a computerized system that automatically matches buy and sell orders for securities in the market. ECN trading is especially helpful when investors in different geographic areas wish to complete a secure transaction without the use of a third party.”
  2. Limit order – “A limit order is a type of order to purchase or sell a security at a specified price or better. For buy limit orders, the order will be executed only at the limit price or a lower one, while for sell limit orders, the order will be executed only at the limit price or a higher one. This stipulation allows traders to better control the prices they trade.”
  3. Market order – “A market order is considered the most basic of all orders. It is meant to be executed as quickly as possible at the current asking price for a security. That is why certain brokerages include trading applications with a buy/sell button. Hitting this button generally executes a market order. In most cases, market orders incur the lowest commissions of any order type, as they require very little work from either a broker.”
  4. Pre-market (PM) Trading – “The pre-market is the period of trading activity that occurs before the regular market session. The pre-market trading session typically occurs between 8:00 a.m. and 9:30 a.m. EST each trading day. Many investors and traders watch the pre-market trading activity to judge the strength and direction of the market in anticipation for the regular trading session.”
  5. Stop-limit Order – “A stop-limit order is a conditional trade over a set timeframe that combines the features of stop with those of a limit order and is used to mitigate risk. It is related to other order types, including limit orders (an order to either buy or sell a specified number of shares at a given price, or better) and stop-on-quote orders (an order to either buy or sell a security after its price has surpassed a specified point).”
  6. Stop-Loss Order – “A stop-loss order is an order placed with a broker to buy or sell a security when it reaches a certain price. Stop-loss orders are designed to limit an investor’s loss on a position in a security and are different from stop-limit orders. When a stock falls below the stop price the order becomes a market order and it executes at the next available price. For example, a trader may buy a stock and places a stop-loss order 10% below the purchase price. Should the stock drop, the stop-loss order would be activated, and the stock would be sold as a market order.”
  7. Trailing Stop – “A trailing stop is a modification of a typical stop order that can be set at a defined percentage or dollar amount away from a security's current market price. For a long position, an investor places a trailing stop loss below the current market price. For a short position, an investor places the trailing stop above the current market price.”
  8. US Market Hours – “The New York Stock Exchange (NYSE) is based in New York City. The NYSE is one of the largest stock exchanges in the world, and it is a public entity. As of 2019, the NYSE has normal trading hours from 9:30 a.m. to 4 p.m. ET, unless there's an early close due to a holiday. The Nasdaq is an American stock exchange that serves as a global electronic marketplace for securities trading. Pre-market trading hours are from 4 a.m. to 9:30 a.m. EST, and after-hours trading extends from 4 p.m. to 8 p.m. EST. The normal trading hours begin at 9:30 a.m. EST and end at 4 p.m. EST.”
  1. Volume – “Volume is the amount of an asset or security that changes hands over some period of time, often over the course of a day. For instance, stock trading volume would refer to the number of shares of a security traded between its daily open and close. Trading volume, and changes to volume over the course of time, are important inputs for technical traders.”
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